Digital Transformation in Insurance – What is It and Why Does It Matter?
The current trends, as well as the needs of consumers, direct the development of businesses onto digital paths. Gradually, fewer processes require human intervention, and ubiquitous automation is progressing. Many companies have changed their approach or business models to meet today’s requirements. The insurance industry is also innovating and continuously improving the services it provides. It undertakes digital transformation in various ways to overcome modern challenges, meet regulations and satisfy customers. It is a time-consuming and extremely demanding process, both from a technological and business point of view. Thus, why is it such a crucial move?
Insurance – background
The insurance industry has been resistant to technological changes for a long time. Gradually, however, the impact of and vulnerability to digitization is becoming more and more visible, which, moreover, brings several benefits to both consumers and insurance businesses. There are many reasons why insurers invest in transformation. These are customer-centricity, the need to simplify and automate processes, or the increasing use of algorithms. Leveraging technology to build and improve their business, as well as enhance the consumer experience and service, is one of the greatest challenges facing insurers today. According to Accenture’s research, 90% of insurers surveyed have a coherent, long-term plan for technological innovation that covers their entire company. The same number of insurance respondents say that in five years’ time consumers will buy their insurance through web and mobile applications. Besides, 80% believe that more than half of customer interactions will be largely handled by virtual assistants, and 83% expect blockchain to be the dominant accounting system in business-to-business (B2B) financial transactions within five years. Survey results show that insurers are using technology not only to improve performance but also to improve customer relationships and accelerate growth. The conclusion is simple – the digital transformation of insurance is inevitable but also brings many exceptional opportunities.
What is digital transformation in insurance?
Digital transformation and the introduction of breakthrough innovations are already increasingly common approaches in the insurance industry. Constantly growing consumer expectations, outdated technologies, fierce competition, and new regulatory requirements are the driving forces behind such changes. Insurance companies face the necessity of digital transformation to generate not only higher profits but above all value. The term digital transformation itself can be defined as utilizing the power of cutting-edge technologies to improve business models, create better user experiences, acquire new customers, and broaden business opportunities in general. Insurance companies that are undergoing digitization can automate slow, error-prone processes and increase speed, efficiency and solvency. Insurance digital transformation supports long-term success, enhanced flexibility and performance.
A good digital transformation strategy requires finding weaknesses in your current business processes, which will be the starting point for taking automation and choosing the right technological solutions. It will also include defining KPIs and development goals. Only at further stages, it is possible to consider the suitable approach to the development from scratch or the reconstruction of the existing software. This will be a change not only in terms of technology but for the entire business, which should be kept in mind
Which technologies will have the most impact on insurance companies in the future?
If you look at trends, predictions, and research, you can immediately see the dominant technologies in the field of digital transformation of insurance.
Insurance companies have been already using data and analytics for a long time. However, it is revolutionary to use computing power and the ability to store huge amounts of data. Data analytics helps automate many insurance processes. It is also extremely useful in marketing, which is largely based on consumer data to target your actions more effectively. The amount of data is constantly increasing, so without a powerful digital transformation of business, it is not possible to efficiently derive information from it nor to store it effectively. Data analytics requires complex algorithms and is increasingly relying on machine learning and deep learning. Clearly defining and understanding how analytics can deliver insights and value can effectively help your business and increase sales, as well as better predict outcomes and prevent crises.
Read also: 7 benefits of healthcare ERP systems
Even though insurance companies are relatively cautious about adopting cloud-based solutions, more and more have opted to do so in recent years. The need for innovation, greater agility, efficiency, and lower infrastructure costs are some of the reasons for such decisions. Given these benefits, it is not surprising that the cloud is one of the most important technologies for insurers, often underpinning the IT endeavor and the entire digital transformation.
Blockchain is conquering more and more industries. Its potential and wide possibilities can also be effectively used by the insurance sector. What’s more, blockchain has a huge impact on shaping new solutions in insurance, and it is the basis for completely new business models and services. It ensures remarkable data transparency and precision, facilitates access to data for all parties to the insurance contract. Blockchain provides greater autonomy and a solid digital basis for the safe use of mobile transactions or faster payment models.
Open Banking / PSD2 in Insurance reality
Insurance companies can benefit from Open Banking at various levels. Open Banking helps you optimally use your data and introduce the latest, modern payment methods. By using open banking platforms, insurance companies are taking advantage of the opportunities offered by the Payment Services Directive 2 (PSD2). A prerequisite for an open banking strategy compliant with PSD2 is the consent of insurance clients to use their data by providing their financial data via an online banking login. Using such data, account information service providers offer the insurance company a comprehensive analysis of customer expenses and income. Based on this, you can offer personalized recommendations and generate real value. And this is just a fraction of the opportunities that PSD2 and Open Banking can bring to the insurance industry.
What benefits digital transformation bring for insurance companies?
Using mobile devices to send documents, make payments or report cases is a standard and everyday reality. No wonder that the insurance industry also had to respond to the need for digital innovation and take steps towards being affordable for customers and their requirements. Insurance companies that have embarked on digital transformation have not only increased their capabilities but can boast more customers. Among the other benefits, we can also mention:
- Faster delivery of insurance products and services to the market,
- Process automation, which improves efficiency, performance and profits;
- Reduced costs and time of business operations;
- Better quality of customer service;
- Better user experience, greater convenience in submitting and managing claims processes, policies, insurance details, etc;
How technology is changing the insurance industry?
The digital transformation is having a huge impact on many industries, including insurance. You can see significant improvements in terms of operations, user experience, process automation. The use of artificial intelligence, predictive analytics or machine learning speeds up many insurance operations and increases efficiency. Live chat or virtual assistants support customer service and quick response to their needs without waiting for a connection to the call center. The high personalization possibilities that consumers expect are much more possible. Claims, payments, access to data and policy details can be executed via the mobile app. Robust data analytics and artificial intelligence systems can tailor and target marketing efforts for insurers, harnessing the power of social media to reach audiences they can influence. The digital transformation of the insurance industry also helps it become more flexible, scalable and create more advanced opportunities in the future. More and more Insurtech companies appear. The global Insurtech market was valued at $ 2.72 billion in 2020 and is expected to grow by a compound annual growth rate (CAGR) of 48.8% between 2021 and 2028. This growing need to digitize insurance services will drive the market.
What are the leading InsurTech companies?
In the Insurtech industry, we find a lot of companies offering their services to various sectors, from automotive to healthcare. Some of the most interesting players on the market are:
- Slice – an on-demand cloud-based insurance platform provider that enables companies to create digital insurance products to protect homeowners who are engaged in home-sharing services;
- Buzzmove – provides moving companies with accurate data about household contents and enables consumers to inventory and insure belongings through a mobile app;
- Surround – focuses on customer-oriented insurance products. The company’s first offering is a starter pack that includes subscription-based insurance for young city professionals who rent, share, borrow and freelance;
Digital Transformation in Insurance with BinarApps
If you are facing the decision to undertake the digital transformation of your insurance company, planning it soon, or looking for support and consultation, BinarApps is at your disposal. We are one of the leaders among companies developing solutions for Fintech, including insurance software. We have experience and expert knowledge in building blockchain and open banking products. We will help your business stay relevant, competitive and achieve its goals. If you are looking for support with any part of the process, from consulting to full digital product development, please contact us.